Gov. Martin O'Malley proposes wholesale gas tax increase over years

Gov. Martin O'Malley has unveiled a measure to raise millions of dollars a year in new revenue that would fund the state's transportation projects, but it will hit consumers in the wallet every time they fill up their gas tanks.

Not a single Republican said they would vote in favor of the plan, and although Democrats agree something has to be done to fund transportation needs, some expressed reservations.

O'Malley on Monday night unveiled a plan he said could raise as much as $3.4 billion over the next five years for road infrastructure improvements and ways to reduce traffic congestion, such as mass transit expansion.

"This agreement is a balanced, fiscally responsible approach that will address our traffic needs while also creating 44,000 jobs," the governor said.

"There's going to be work done on it in the committee and there will be some tweaking of the bill so it's not carved in stone," said Howard County Delegate Frank Turner, D-District 13.

The bulk of the new money in the governor's plan comes from an increase in the wholesale tax on gas, which would be 2 percent this summer and then 4 percent in 2014. When asked how much more that would cost at the pump, O'Malley replied, "Two cents this July and another 7 cents the following July."

If Congress passes a bill that allows states to charge a sales tax to Internet sales, then Maryland would also apply that money to transportation after 2014, O'Malley said. But if Congress does not pass it, the governor said he wants to increase the wholesale gas tax again by 5 percent and then 6 percent in later years.

O'Malley said in order to balance the hike in the wholesale gas tax, he wants to reduce the excise tax on gas -- which hits consumers directly -- from 23.5 cents a gallon to 18.5 a gallon.

But with gas currently hovering near the $4 mark, some legislators said now is a bad time to introduce such a measure.

"People are having a hard time paying their electric bill, their food bill, putting gas in their tank, sending kids to school. It's outrageous," said House Minority Leader Tony O'Donnell, R-District 29C.

"They are going to the motorists again, and the motorists are paying a huge burden now. Taxes are so high already for motorists," said Carroll County Delegate Susan Krebs, R-District 9B. "Over the past eight years, more and more of our motorists' money -- fuel taxes -- are going to mass transportation."

Weeks before the governor's announcement, economist Anirban Basu from the Sage Policy Group studied the impact of several gas tax increase scenarios. He found that a 10-cent hike will cost jobs.

"We're talking about job loss in the range of 1,000 to 2,000 jobs statewide based on lost consumer power," Basu said.

The plan also links Maryland Transit Administration fares to inflation, raising the current price from $1.60 to a $1.70, and by another 10 cents in three years.

Without generating new revenue, transportation officials are faced with stopping design work on the proposed Purple Line in Montgomery and Prince George's counties and the Red Line in Baltimore.

The General Assembly will begin debating the governor's bill in committee hearings in the House of Delegates this week.

How does Maryland's plan compare?

The plan may make Maryland one of the more expensive states on the price of gasoline, but it will remain among the cheapest for a ticket on public transportation. The flat state gas tax hasn't been touched since 1992.

Currently, motorists pay 41.9 cents per gallon in state and federal tax. The proposal is estimated to increase that amount to 43.9 cents per gallon starting in July, and more than 50.9 cents per gallon next year, which would make Maryland as having the most gasoline taxes in the region -- Pennsylvania stands at 50.7 cents per gallon; Washington, D.C., is at 41.9 cents; and Delaware is at 41.4 cents.

Big competitor Virginia just overhauled its state gas tax, replacing it with a mix of sales taxes that vary by region. It's estimated everyone in Virginia will now pay $10 to $15 more per month to fund transportation.

The Maryland plan does the reverse for users of public transportation, calling for a small increase in fares, but keeping the MTA among the least expensive bus and rail systems in the east.

In Philadelphia, transit riders pay $2 a ride; in New York and Atlanta, riders pay $2.50; in Washington, D.C., where Maryland and Virginia suburbs split Metro fares, riders pay $1.80 per bus ride and $2.10 to $5.75 per subway ride depending on the trip.

By comparison, MTA Maryland charges $1.60 per bus or rail ride.

Those comparatively low MTA fares have been a favorite target for critics of a higher gas tax, who argue the system needs to pay more of its share of the state's transportation costs.

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